Friday, June 20, 2008

Chronicles Of Depression 2.0: #133

WASHINGTON (AP) - A broad bipartisan coalition supporting a massive foreclosure rescue beat back GOP efforts to gut it Thursday, defying a White House veto threat and quashing a bid to make it victim to revelations about two senators' VIP mortgages.

Administration officials said they oppose the inclusion of $4 billion in the measure to help states buy and rehabilitate foreclosed properties, and a plan to have government-sponsored mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) pay for the rescue.

There is some concern over whether two Senators who received preferential mortgages amounts to undue influence in the crafting of this measure.

Democrats and many Republicans consider the measure a political imperative amid rising foreclosures and growing public anxiety about the sagging economy.

Its centerpiece is a foreclosure rescue program in which the Federal Housing Administration would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.

The measure is designed to help hundreds of thousands of borrowers in danger of losing their homes, but it also would benefit mortgage holders by allowing them to avoid costly foreclosures and reclaim some of what they're owed by people facing financial ruin.

The bill would tighten controls on Fannie Mae and Freddie Mac - which provide huge amounts of cash flow to the mortgage market by buying home loans from banks - creating a new regulator for the firms.

It also would provide a $14.5 billion array of housing and other tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year, and boosts in low-income tax credits and mortgage revenue bonds.

There are always revenge effects to things like this. Crafty lawyers seize upon any ambiguity they can and twist it to the advantage of their corporate employer.